Supply-side decline and demand-side resilience: The bear market bottom is just around the corner

Based on the trend that long-term holders (LTH) have cumulatively released over 5 million BTC during this correction, the supply of “big players” is gradually diminishing. What does this signal mean? The power on the supply side is weakening, which is a key indicator that the bear market may be nearing its bottom. Based on this observation, I tend to believe that the countdown to the market bottom has begun.

However, it’s important to clarify a common misconception—the definition of a market bottom cannot be understood from a single perspective, but should be considered from both spatial and temporal angles.

Accelerating Outflows on the Supply Side, Approaching the Bottom

Referring to the previous cycle: in June 2022, BTC bottomed at around $17,000, just above the true absolute bottom of $15,000. This indicates that, in terms of spatial dimension, we are already in the bottom zone. But it took a full 7 months to rebuild consensus and restructure after reaching that bottom, during which events like the FTX collapse occurred as black swan incidents.

Therefore, my current view can be summarized as: from a spatial perspective, we are getting closer to the bottom; but from a temporal perspective, some more time is needed for patience and accumulation.

This is not pessimism, but a rational judgment based on historical patterns. The decline in supply is a necessary condition for a bottom, but far from sufficient.

The Three Layers of Demand and Bottom Judgment

Besides observing supply-side changes, understanding the demand ecosystem is equally crucial. The market’s buying power can be divided into three levels:

First Layer: First Buyers (FB) — New entrants providing fresh capital to absorb excess supply. These buyers are often influenced by macro risk appetite. When risk appetite rises, the number of FBs naturally increases. In a bear market, this force is currently quite weak.

Second Layer: Conviction Buyers (CB) — The most rational and savvy institutional and individual investors in the market. They tend to buy firmly during declines and sell rationally during rallies. In other words, rather than always perfectly bottom-timing, the bottom itself is largely “bought” by their accumulated buying power.

Third Layer: Momentum Buyers (MB) — Emotion-driven buyers acting as accelerators. In a bear market, this group is mostly dormant.

Clearly, in the current bear market pattern, we should focus on the movements of the core force—CBs.

The Logic Behind the 3.48 Million BTC Held by Smart Money

According to on-chain data, recent statistics show that CB investors have accumulated a total of 3.48 million BTC, setting a new high for this cycle. Since the beginning of this year, they have increased holdings by 1.22 million BTC.

How significant is this number? Considering that BTC’s current price is already well above the levels seen during the May 2021 $5,190 event, the LUNA collapse, and the FTX collapse, and yet the accumulation has reached these historical key levels, it signals: Smart money is deploying more capital at current prices than at any previous bottom in history.

What does this reflect? It indicates that rational decision-makers strongly recognize the current market’s value proposition. They don’t need to guess “where the bottom is” like retail investors or dream of “going all-in at the lowest point.” As long as the price offers enough value, CBs will continue buying, steadily absorbing excess supply until a new equilibrium between supply and demand is established.

The Critical Point of Supply-Demand Balance: A Signal for a New Cycle

What is the essence of a market bottom? It’s the point where supply dries up and demand forces reach equilibrium. Once this balance is achieved, and after months or even longer of consensus rebuilding, the market will initiate a new trend.

From historical data, the strong buying conviction and capital deployment scale demonstrated by CB investors now fully meet the criteria that “the bottom is not far.” Their actions are not emotional outbursts but a deep recognition of the market’s fundamentals.

This is why, although the time dimension still requires patience, the spatial dimension is already approaching—the weakening of supply combined with the steadfastness of demand is jointly constructing the market’s bottom structure. When this structure becomes sufficiently solid, the next cycle will officially begin.